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City of Pleasanton <br />1. INTRODUCTION <br />Water Rate Study <br />1. Introduction <br />The report is organized to explain the three analytical steps of the analysis. First, <br />revenue requirements are determined for FY 2010 -11. Rates need to be designed to <br />generate the required revenue. Second, the cost -of- service analysis determines how <br />much of the revenue requirement should be paid by each customer class Finally, the <br />rates need to be designed for each customer class. <br />1.1. CURRENT RATES <br />The City's rate payers pay the sum of two charges for water service on a bi- monthly <br />basis: a fixed service charge based on the size of the service connection plus a <br />consumption charge based on metered water use during the billing period. The rates <br />are summarized in Figure 1 -1. <br />The service charges for the same type of supply (i.e., potable water supply) are the same <br />regardless of customer class. In other words, the charge for a meter of a given size is the <br />same for all meters of that size for a given type of supply regardless of which class of <br />customer is served. This is a legal requirement, as well as a rate making practice. <br />Consumption charges can vary depending on the customer class. In the City's case, the <br />residential class currently comprises single family and multi- family customers. <br />Residential customers pay tiered consumption charges also referred to as "increasing <br />block rates." Residential customers pay rates for each range of consumption (tier or <br />block); the rate in each tier increases as consumption increases. The total consumption <br />charge is the sum of the consumption in each tier multiplied times the respective rate in <br />each tier. The current residential increasing block rates comprise three tiers. <br />For non residential customers, the consumption charges are uniform charges per unit of <br />consumption with the exception of irrigation customers, which pay seasonal <br />consumption charges. Under seasonal rates, the higher rate is paid during the summer <br />when irrigation places the greatest demand on the system. During the non irrigation <br />season, the price decreases when peaking is lowest. <br />1.2. RATE- MAKING OBJECTIVES <br />The City has several rate making objectives that the rates are designed to achieve: <br />Revenue sufficiency Rates need to be sufficient to fund operating and capital <br />costs and maintain adequate reserves. <br />March 18, 2010 <br />Page 5 HF&H Consultants, LLC <br />